U.S. Optimism May Be
Surprisingly Short-Lived

Edited by Hugo Dixon

Updated Jan. 5, 2001 1:04 a.m. ET

Is the rise of the Nasdaq a dead-cat bounce? It certainly looks so. The U.S. Federal Reserve has cut interest rates by half a percentage point. However, at least half of this was expected by the end of January, so the bonus only amounts to a quarter point. Wednesday's 14% rise of the Nasdaq can only be justified on fundamental grounds if Fed Chairman Alan Greenspan's move is sufficient to revive the tech investment boom. This is unlikely.

The information-technology investment boom had a variety of origins. First, there...